Tags: frequent | flier | miles | revenue

Frequent Flier Programs Undergoing Changes

By    |   Friday, 20 December 2013 07:20 AM

Airline carriers make it easy for consumers to earn frequent flier miles, but with heavy restrictions, fees and surcharges, cashing in on those miles is another story.

Savvy consumers turn their shopping dollars into points with every gallon of gas or shopping opportunity.

As airline programs undergo a makeover, passengers are facing uncertainty, as plan changes, point devaluations and mounting surcharges compromise the value of points in the bank.

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Controversies involving the carriers and passengers have made their way into the U.S. Supreme Court with cases such as Minnesota Rabbi S. Binyomin Ginsberg, who was notified that his status at Northwest was revoked due to "abusing the program" by complaining and asking for compensation frequently, according to CNBC.

If the Supreme Court allows passengers to sue, we can expect to see many more cases, Tim Winship, publisher of FrequentFlier.com, explained.

"Because let's face it, there is a considerable amount of discontent among consumers as far as these programs go," Winship said.

If airlines switch current programs to a revenue-based plan — awarding points for the amount of dollars spent with the carrier verses getting points for the amount of miles flown — there will be quite a bit of protest among travelers.

While smaller carriers such as Jetblue, Southwest and Virgin America have already made the switch, it's just a matter of time before major U.S. carriers get onboard.

"I do expect 2014 to be an interesting year. I am convinced that one of the legacy carriers will make some sort of move into revenue-based [programs]," Randy Petersen, founder of Milepoint.com, told CNBC.

Once a major U.S. carrier makes the switch, others will likely follow, Winship told CNBC.

Travelers would benefit as the limited number of award seats would be a thing of the past and seats would be the same price as a cash passenger seat when redeeming points at the time of booking. Winship explained that points have a predetermined value, which are applied to the price of the ticket.

However, those travelers who have benefited from mileage-based plans would feel a pinch.

"(They've) spent a lot of time and energy over the years getting to know these programs and figuring out how they work and how they get the best value out of them. For those folks, the mileage-based programs do offer much better opportunities to get outsize value," Winship told CNBC.

Airlines have been making customers jump through hoops with cash co-pays and fuel charges.

British Airways has landed itself in U.S. District Court, as four frequent flier program members are suing the airline for breach of contract.

"Our allegation is that the fuel surcharge is not a fuel surcharge, it's more like a British Airways profit surcharge and that it's not based on the cost of fuel," said David Stellings, an attorney representing the frequent fliers.

"It's just a source of revenue for the company."

United Airlines and Delta are making it harder to redeem frequent flier miles, according to CNNMoney. For travel after Feb. 1, Delta's SkyMiles program will require more miles to get rewards for some flights from the continental United States to Hawaii, the Middle East, Asia and Africa.

"Domestic carriers have been tinkering with their loyalty programs at a much more rapid pace this past year or so, including adding spending requirements to achieve elite status as well as changing award redemption requirements," Rick Seaney, chief executive of Farecompare.com, told CNNMoney.

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Airline carriers make it easy for consumers to earn frequent flier miles, but with heavy restrictions, fees and surcharges, cashing in on those miles is another story.
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2013-20-20
Friday, 20 December 2013 07:20 AM
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